Silicon Recycle: Tech And Solar Share "Love Of Profits"

You'd think that with sand being one of the world's most abundant natural resources--and the key ingredient used in chip making--that there'd be no chance of a silicon shortage. You'd be wrong, and you can thank the incredibly fast growing solar panel industry for the problem.

These two industries have been fighting for raw material to fuel their growth for some time, but now, an innovative solution may make both sides happy--and generate many happy returns for investors in companies like Intel ,National Semiconductor , Texas Instruments , Freescale, AMD and so many others.

Welcome to the new era of "silicon recycling." Some analysts say the industry has exploded into something worth $750 million last year. Not bad for a business that didn't even blip the radar screen a few short years ago.

So what's going on?

"We have seen a 200% climb in the last year in all grades silicon, from poli right through scrap wafers," says Jeff Harte, vice president of recycling giant Global Expertise inSan Jose, Calif.

And that price hike means discarded bits and pieces left over from the manufacturing process are almost worth their weight in gold. And it's leading to enormous competition among recyclers who have begun that never-ending circle of supply, demand, and ever-increasing prices for the scrap.

"I usually have an hour to make a decision on orders upwards of $1 million per order and that can happen on a daily basis," says Harte. "It's very frustrating because we are also competing with the brokerage market."

The trouble for solar panel makers: chipmakers enjoy the inside track on hard-to-find silicon because many of the top companies have already locked up long-term contracts with suppliers. But now, through these recycling programs, solar companies have found a new pipeline.

"For all six years since 2000, we have grown at more than 40% a year in the global solar market," says Julie Blandon at fast-growing SunPower.

So while solar makers love the new supply, chipmakers are seeing a lucrative new revenue stream from material they had been paying truckers $100 a drum to haul away as garbage. And because of that, it's pure profit.

"At TI this year, we expect to receive somewhere between $5 million and $10 million on sales of our scrap wafers," says Mike Hayden, the company's chief silicon buyer.

Sure, that ain't huge money, but as the solar business continues to thrive, this trash-to-treasure thing could add up to some real money, leading TI to take aggressive action to make this a priority for the company.

Squeezing more pennies from every grain of sand, and keeping this stuff out of landfills? It's the kind of thing shareholders AND environmentalists can get their arms around. Never mind that Silicon Valley is home to more EPA Superfund toxic sites than anywhere else in the country, thanks to the heavy amount of chemicals used in the chip making process. This is still a creative, beneficial way to address a whole host of issues simultaneously, while banking a nice chunk of change in the process.